Wolf Creek Soap Company

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.' IN THE MATJ'ER OF .

WOLF CREEK SOAP COMPANY COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLJWED VIOLATION OF SEC. IS OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 3116. Complaint, Apr. 26, 1937-Dr.cision, June 2.9, 1937 Wbe re n corporation t•ngugcd in manufacture, s:1Je, and dlstrllmtlon of soap to retailers and peddlers and direct to consuming public, in substantial competition with those engaged In manufacture and distribution of like and sim!Jar products and sale thereof In commerce among the various States nnd In the District of Columbia- (a) Described many articles and Items listed in its price lists as possessing retail values or prices many times in excess of their actual selling price to retailer or otlwr vnrdonser, aiel many times in excess of actual retail Price thHeof, nnd thus inrlndt•d ilf'ms and articll'S such us soaps and cold <Teams nnd rombinntions wlt-h retail prices stamped or printed thereon, or on lahels uttacl1f'd tllf'rrto, or on containers In wlllch offered and sold to public, whi(•h similarly t•xrceded uctual selling price of particular item or article ,;:old by peddler or retailer to consuming public, and were many times In excess of true and actual value, and constituted false and fictitious retail prlrC's rrpresPnting In no sense either true value or selling price of artldes thus marked, and Ums placed in lwnds of aforesaid peddler and retailer purchasers instrument and means enabling them to commit a ft·uud upon substantial portion of consuming public through representing lind offering said articles ns genuinely superior products produced lly manu· fnC'turers fur ~>ale in usual course of trade to general consuming ptiblic at and for retail price stamped t11erron or on containers thereof; and (b) Falsely represented, through use of abbreviation ''Dr.", and name of indi- VIdual, and word "Medicated" In Jwme of one of its aforesaid products or Offerings, that medical doctor was connected with derivation of formula from which said soap combination was made, and. that it had ingredients ot such a character as to give it substantial therapeutic value as a true Inedicntell Sl:lUp, fttets lJelug no physician was in any way connected with such formula or matmfucture ot said product, which contained no ingredients of the! apcutlc nature in such quantities, if present at all, as to give \V such soup any such value:

lth effect of misleading substantial portion of consuming public in the several States and In ~<nid Dl.strlct by inducting them mlstaklngly and erroneously to believe that Items of merchandise described as aforesaid were of superior value and sold and distributed by it with Intent that they should be resold at retail prlc('S do~ely approximating those stamped thereon, and that sucb products, because of ptiet's thus affixed or stamped, were com· POS('d of suprrior lngrelllmts and ordinarily retailed, in usual course of trade, for prices closely approximating those marked thereon as aforesaid, and that a doctor ot medicine derived formula from which aforesaid soap combination was made, or was connected with manufacture thereof, and with tendency and capacity to mislead and dcceive distributors and Complaint 25 F. T.C. purchasing public into erroneous and mistaken belief that such statements !md representations were true, and with effect of inducing members of public to buy its said products by reason of such erroneous beliefs, and of thereby unfairly diverting trade to it from competitors who do not make use of same or similar acts or practices; to the substantial injury of competition in commerce:

Ilcl!l, That such acts and practices were to the prejudice of the public and competitors and constituted unfair methods of competition. Mr. S. Brogdyne Teu II for the Commission.

II olland & Holland, of Dayton, Ohio, for respondent. COMPLAINT Pursuant to the provisions of an Act of Congress, approved Sep· tember 2G, 1914, entitled "An Act to create a Federal Trade Com· mission, to define its powers and duties, and for other purposes," the Federal Trade Commission, having reason to believe that the 'Yolf Creek Soap Company, an Ohio corporation, hereinafter referred to as respondent, has been and is using unfair methods of competition in commerce, as "commerce" is defined in said act, and it appearing to said Commission that a proceeding by it in respect thereof wonlcl be in the public interest, hereby issues its complaint stating jts charges in that respect as follows:

PAI!AGRAPII 1. Respondent, 'Yolf Creek Soap Company, is a cor· poration organized and doing business under the laws of the State of Ohio, having its principal place of business in the city of Dayton, State of Ohio. It is now, and has been for more than one year last past, engaged in the manufacture and in the sale and distribution of soap in commerce between and among the various States of the United States and in the District of Columbia.

PAn. 2. In the course and conduct of its said business, respond· cnt is now and has been in substantial competition with other cor· porations, and with individuals, firms, and partnerships likewise en· gaged in the business of manufacturing and selling soaps and other household novelties in commerce among and lx>tween the various States of the United States and in the District of Columbia. PAn. 3. 'Vh<'n said products are sold, respondent transports, or causes same to he transported, from its place of business in the State of Ohio to purchasers thereof locateu in States of the Uniteu States other than the State of Ohio, anu in the District of Columbia. '111ere has been for more than one year last past, and still is, a constant cur· rent of trade and commerce in said products so sold Ly respondent between and among the various States of the United States auu in the District of Columbia.

WOLF CREEK SOAP CO. 329 327 Complaint PAn. 4. Respondent in soliciting the sale and in the selling' of its commodities, and for the purpose of creating a demand on the part of the consuming public for certain commoditiel'l, has advertised its c-om~oditie.s through the media of price lists and other printed matter !JUbhshed, Issued and circulated through the United States mails to Its .customers and prospective customers in the various States of tlle Dnited States and in the District of Columbia. P.'\R. 5. In the aforesaid ways and by the aforesaid means, respondent makes and has made to the general public false and misleading statements with reference to the commodities offered for sale by it. ..Many articles and items of merchandise are priced and described as possessing retail prices and ralues greatly in excess of the respondent's actual selling price to the retailers or other pu.rchasers, and ~reatiy in excess of the actual value thereof. A number of the said lterns and articles of merchandise described as aforesaid have fictitious retail prices stamped on the product itself or printed on the labels attached thereto, or on the containers in which they are offercu for sale and sold to the public.

PAn. 6. Hepresentative of such statements and representations made by respondent on the containers regarding the selling price and value of the commodities thus offered by it for sale, are the· following: "l\Iuj0stic Assortment of Toilet Soaps-Estimated total value $1.00;" "Majestic Baby Castile Soap-Price $.50;" "Lady Estel Cold Cream Soap Combination-Price 75'/ ;" and "Dr. Bernard's :Medicated health Soap Combination-Price 75'/.:' On other labels and cartons used by the respondent many other fictitious retail prices are imprinted. As a result of the use of such fictitious price marks as described, the respondent has led the members of the purchasing public to mistakenly belie,:e that said soaps have retail values approximating said fictitious prices and are made from superior ino-redients and are of superior quality. A s a result of the"' use of the words "Dr. Dernar d' s " t I1e pure11asmg. Public is led into the ·mistaken and erroneous belief that a II}.medical doctor was or is connected with the formation of the ·formula from ~which the ~o-call~d "Dr. Bernard's l\Iedicated Health Soap Combinaholl'' is made, and that said soap has ingredients of such character as to gi re it substantial therapeutic Yalue as a true medicated soap. :PAR. 7. In truth and in fact, the :Majestic Assortment of Toilet ~oaps is sold to retail dealers for 8t per unit; l\Iajestic Baby Castile Soap is sold to retail dealers for 8¢ per unit; Lady Estel Cold Cream Soap Combination is sold to retail dealers for 8¢ per unit; nnd Dr. Dernard's l\fedicated Health Soap is sold to retail dealers for 8¢ per Unit.

Complnlnt 25 F. T.C. All of said soaps are in fact made from cheap and inferior ingredients and said soaps themselves are of cheap and inferior quality and are not of such quality as to justify a retail price in any way closely approximating the retail price or value represented. Further, in truth and in fact, no doctor or physician was in any way connected with the discovery of the formula for, or is now in any way connected with the manufacture of, the so-called "Dr. Bernard's .Medicated Health Soap." Said soap does not contain any ingredients that are of therapeutic character in such quantity, if at all, as to give said soap any therapeutic value.

PAR. 8. The respective items above referred to are usually and regularly sold to retail dealers and peddlers for the price indicated in paragraph 7.• The said retail prices at which the products are uctnally sold to retail customers do not appear on the containers. PAR. 9. Over n. period of many years, manufacturers in many trades have adopted and followed the custom of marking or stamping on an flrticle or item of manufacture, or on the carton thereof, the retail price at which the said manufacturer suggests that the retailer should sell the item or article to the ultimate consumer or purchaser. This suggested retail price so stamped or marked is intended to represt.'nt the cost to· the manufacturer of the article, plus a reasonable profit for the manufacturer and retailer, awl, consequently, to represent the approximate retail sale value of the item. The public generally understands this custom, and has been lead to and does place its confidence in the price marking so stamped and the representations so made as to the quality of the product, to the extent that it purchases a substantial volume of merchandise in reliance upon this aforesaid custom.

PAR. 10. For many years a substantial part of the consuming public has had and has expresseu a preference for soaps and for simil:tr household articles which are composetl of superior ingredients, and which are produced by the mnnufacturPrs thereof with the intent and drsign of selling said products for prices in excess of the gcn· eral and usual range of prices for similar products or for products made of inferior ingredients. Said manufacturers, following the custom herein detailed, have marked or stumped the suggestrd re· tail price on said products us indicating the superior quality and character of the products and their higher value. 'Vhenever a genuinely superior product RO stamped or marked with the retail price thereon is offered for sale at a substantially reuucc:I price, the general purchasing public is lead to LclieYe and docs believe that in purchasing said product it is securing a bargain not ordinarily obtainable in the usual course of trade. The purchasing WOLF CREEK SOAP CO. 331 327 Complaint Public has a preference for purchasing genuinely superior products sold at less than the customary retail price thereof over ordinary pro~ucts sold for their regular price, which is lower than the normal :tetatl value of the superior products in the customary· course of trade; PAn. 11. The retail prices so stamped or printed -as aforesaid upon :respondent's products are greatly in excess of the selling price of the :said items or articles or merchandise by the retailer to the consuming public and are in excess of their true and actual value. The t:tnil prices so stamped or printed. as aforesaid are false and fictih~us and in no sense represent either the true value or the sellin~ Prlce of the articles so price-marked.

PAR. 12. The aforesaid false and misleading advertising and repre- ~ntations, together with the aforesaid false and fictitious price-mark- Ings on the part of the respondent, place in the hands of the aforesaid' Peddlers and retailers buying for resale, an instrument and means; ~hereby said peddlers and retailers may commit a fraud upon a substantial portion of the consuming public, by enabling such dealers to~ ~epresent and offer for sale and sell respqndont's soaps as being genu- Inely superior products produc~d by the manufacturer thereof with the intent and purpose of selling the said products in the usual course of trade to the general consuming public at and for approximately the retail price stamped on said products or on their eontainers.

PAR. 13. There are among the competitors of the respondent in com- ~~rce, as described in paragraph 2 above, manufacturers a~1d disrlbutors of like nud similar products who truthfully advertise aiel represent the nature, merit, and value of their respective products_ 1'here are also among the competitors of the respondent manufuctih·eJ·s and distributors of like and similar products who refrain from lll>l'Psellthw by fictitious price markings, that the merchandise· oft' "'' ered for sale by them has merit or value that it does not ha,·e. PAR, 14. The effect of the foregoing false and misleading representations and acts of the respondent in selling and offering for sale· such items of merchandise as hereinbefore referred to, is to mislead a substantial portion of the purchasing and consuming public in the several States of the United States by inducing them to erroneously and · · 111Istakenly believe: l. That the various soaps sold and distributed by respondent were ~nd are of superior value and were and are mad~ and compounded ~ respondent with the intent and purp~se tl~at said pr~ducts should sold at retail prices closely appro:umatmg the pnces stamped thereon.

332 FEDERAL TRADE COl\Il\IISSION DECISIONS Findings 251t'.T.C. 2. That the said products, because of the price marks stamped or fixed thereon, are composed of superior ingredients and are products which ordinarily retail in the usual course of trade for prices closely approximating the prices stamped on the merchandise. 3. That a medical doctor is connected with the compounding and manufacturing of Dr. Bernard's Medicated Health Soap; that said product is made under the formula of a medical doctor; and that said product has substantial therapeutic value. PAR. 15. The foregoing false and misleading statements and repre· sentations on the part of respondent have induced, and still induce, n substantial number of retail merchants, as well as the consumer purchasers of said commodities, to buy the products offered for sale, :sold, and distributed by respondent, on account of the aforesaid .erroneous and mistaken beliefs. As a result thereof, trade has been ·diverted from those competitors of respondent engaged in similar .businesses, referred to in paragraph 13 above. As a consequence ~!!9rMf, substantial injury has been and is being done by respondent to competition in commerce between and among the Yarious States of the United States.

PAR. 16. The aforementioned methods, acts, and practices of respondent are all to the prejudice of the public and respondent's competitors, as hereinabove alleged. Said methods, acts, and prac· tices constitute unfair methods of competition in commt>rce within the intent and meaning of Section 5 of an Act of Congress entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," approved September 26, 1914, RE.PORT, FINDINGS AS TO THE FACTS, AND ORDER Pursuant to the provisions of an Act of Congress approved Sep· tembcr 26, 1914, entitled "An Act to create a Federal Trade Corn· mission, to define its powers and duties, and for other purposes," the Federal Trade Commission, on April 26, 1937, issued and served its complaint in this proceeding upon respondent, 'Volf Creek Soap Company, charging it with the use of unfair methods of competi· tion in commerce in violation of the provisions of said act. After the issuance of said complaint and the filing of respondent's answer thereto, a stipulation as to the facts was entered into between ,y, 'f, Kelley, Chief Counsel of the Commission, and George F. Holland, counsel for respondent, which said stipulation was thereafter ap· proved by the Commission. Thereafter the proceeding regularly came on for final hearing before the Commission on the said corn· plaint and answer thereto, and the stipulation as to the facts (re• spond~nt having waived the filing of a brief) ; and the Commission Woh' CREEK 80.\P CO. 333 327 Findings havi~g duly considered same, and being now fully advised in the premises, finds that this proceeding is in the interest of the public and makes this its findings as to the facts and its conclusion drawz; therefrom:

FINDINGS AS TO THE FAOI'S 1~.-\RAGRAI'II 1. The respondent, 1Volf Creek Soap Company, is an Oluo corporation organized and doing business by virtue of and Under the laws of the State of Ohio.

PAn. 2. Respondent has been for more than one year last past engaged in the business of manufacturing, selling, and distributing soap to retailers and peddlers, and direct to the consuming public. PAn. 3. In the sale of said product respondent has transported or caused the same to be transported from its principal place of busilless in the State of Ohio to purchasers thereof located in States of the United States other than the State from which shipment origillated, and in the District of Columbia.

There has been for more than one year last past, and still is, a con- ~ant current of trade and commerce in said soap so sold and distributed respondent between and among the various States of the United l states and in the District of Columbia.

PAn. 4. For more than one year last past the respondent has been eng"ged in substantial competition with other individuals, partnersJ~ips, firms, and corporations engaged in the manufacture and disttiLution of like and similar products and in the sale thereof in com- Inerce between and amoncr the various States of the United States ~nd in the District of Coh~nbia.

PAn, 5. In the course and conduct of its business as aforesaid the tespondent, in soliciting the sale of and in selling its product, and ~or t_he purpose of creating a demand on the part of the consuming !, Ubhc for said product has for more than one year last past caused Its. Product to be adverdsed through the media of price lists and other ~tinted matter published, issued, and cir~ulated throu~h the Un_ited states mails to its customers and prospective customers 111 the varwus States of the United States and in the District of Columbia. In said "'ays and hv said means respondent has made to the general public 1Ha ny unfair • false and misleading' statements wit• 11 re f erence to t 11e ('orn ' ' ) tnodities offered by it for sale. . . . . . 111 said pnce1. I AR. 6. Many articles and items of merchandise hsted ~sts have been described as possessing retail values or prices many times in excess of the actual selling price by the respondent to the retailer or other purchaser and many times in excess of the actual tet 'I ' UI price thereof. 334 FEDERAL TRADE COl\IMISSION DECISIONS Findings 25F.T.0.

A number of the said itetns and articles of merchandise 'described in said price lists have retail prices stamped or printed thereon, on the labels attached thereto, or on the containers in which they have been offered for sale and sold to the public. The retail prices so stamped or printed as aforesaid are many times in excess of the actual selling price of the said items or articles of merchandise sold by the peddler or retailer to the consuming public, and are many times in excess of their true and actual value. The retail prices so stamped or printed as aforesaid are false and fictitious und in no sense represent either the true value or tlle true selling price of the articles so price marked.

PAn. 7. Among the misleading nnd fictitious price markings, false branding, and mislabeling appearing on cartons and containers. and described by respondent in its price lists and other advertising matter ure the following:

1. ''Majestic Assortment of Toilet Soap~stimateu total value $1," whereas this item is sold by respondent at retail for 8¢ p~r unit. 2. "l\Iajestic Baby Castile Soap-price 50~," whHl'as this ~tf'm ~s sold by rrspondent at retailn.t 8¢ per unit. · 3. "l,udy Estel Cold Cream Soap Combination-price 75¢," whereas this itrm is sold by respondent at retail for 8¢ per unit, and 4. "Dr. Dl'rnard's Meuicated Health Soap Combination-price 75¢,' 1 whereas this item is sold by respondent at retail for R¢ per unit. PAR. 8. The false n.nd misleading advertising nn<l representations hereinabove set out together with the false and fictitious price mark· ings herein set out on the part of the respondent place in the hands of the aforesaid peddlers and retailers buying for resale an instru· ment and means whereby said peddlers and retailers may, and do, commit n fraud upon n substantial part of the consumin~ public hY enabling such dealers to reprcH'nt nnd offer for sah' 111\(l sell the said soaps as genuinely superior pt·odncts prouucetl by tlw manufacturers thereof with the intent and purpose of selling the said products in the· usual course of trade to the general consuming public at and for the retail price stamped on the products or on their containers. PAn. 9. 0\·er n periou of many years manufacturers haw in many trades fornwd the custom of marking- or stamping on the article or item of manufacture, or on the container thereof, the retail price nt which said manufacturer suggC'.sts the retailer should 8('11 the item ~r article to the ultimate consumer purchaser. This suggested retail price so stamped or marked is intended to 'represent the cost of themanufacture of the article, plus a reasonable profit for the manuf1tc· turer and retailer and, consequently, to represent the npproximnteretail snles value of the item. The ran(l'e of the suo"O'CsteJ retail price 0 "'"' WOLF CREEK SOAP CO. 335 827 Findings i~ intended by the manufacturer to be indicative of the quality and ~ laracter of the ingredients used and the process by which the item ~s n:n~ufa~tured. The public generally understands the custom erelU data1led and has been led to, p.nd does, place its confidence in the price markings so stamped and the representations thereby mad" ns to the quality of the product to the extent that it purchases a snbstantial volume of merchandise in reliance on this aforesaid custom. PAn. 10. For many years a substantial portion of the consumbw P~blic has expressed, and has had, a marked preference for soaps and toilet articles that are composed of superior ingredients and are produced by the manufacturer thereof with the intent and the design of selling said products for the prices in excess of the general and · 'Usual range of prices for similar products manufactured with the llsual and customary ingredients. Said manufacturers, following the custom herein detailed, have marked or stamped the suggested retail prices on said products as an indication of the superior quality and character of the product in its resulting higher value. Whenever a ~enuinely superior product so stamped or marked with the retail Prtce thereof is offered for sale at a substantially reduced price the R'l'llernl purchasing public has been led to believe, and does believe, that in purchasing' said product it is securing a b!trgain not ordinarily obtainable in the :,usual course of trade. The purchasing public has a Pteference for purchasing genuinely superior products sold at less than the customary retail value thereof over ordinary products sol<l for the reO'ular price which is lower than the normal retail price of th b ' e superior product in the customary course of trade. PAn. 11. Throu,.h the use of the words "Dr. Bernard's'' the purchasing public is ied into the mistaken and erroneous belief that a lnedicat doctor was or is connected with the derivation of the formula froln which the so-called "Dr. Bernard's Medicated Health Soap Co~nbinution" was ami is made and that said ~oap has ingredients of such cl1aracter as to O'ive it substantial therapeutic value as a true tn ,]' 0 t>'-llCated soap. . ~o doctor or physician was or is in any way COI}nected ''rth the detwution of the formula for, or in any way connected with the lnallufacture of the so-called "Dr. Bernard's Medicated Health Soap Co~nbiuation." 'The said soap dol',s not contain any ingredients that of therap€utic nature in such quantity, if present at all, as toa:e R'lve the said soap any therapeutic v~lue. . . P.An. 12. The effect of the foregomg false and Jmsien:dmg repre· Sentations and acts of the respondent in seiling and offering for sale the items of merchandise herein described is to mislead a substan- Order 25F. T.C.

tial portion of the consuming public in the several States of the United States and in the District of Columbia by inducing them to mistakenly and erroneously believe:

1. That the various items of merchandise described in respondent 's price lists and other advertising media are of superior value and are sold. aml distributed by respondent with the intent aml purpose that said products should be sold at retail prices closely approximating the prices stamped thereon.

2. That the said products, because of the price marks affixed or stamped thereon, are composed of superior ingredients and are prodnets which ordinarily retail in the usual course of trade for prices closely approximating the prices stamped on the merchandise. 3. That a medical doctor or doctor of medicine derived the formula from which the so-called "Dr. Bernard's Medicated Health Soap Combination" is made or is connected with the manufacture of said soap.

PAR. 13. The use of each and all the foregoing false and mislead· ing statements and representations as herein set out has had, and 11ow has, the tendency and capacity to mislead and deceive distribu· tors ami the purchasing public into the erroneous and mistaken be· lief that said statements and representations are true, and has in· duced, and now induces, members of the public to purchase the products of the said respondent on account o£ such erroneous beliefs. Said rrpresentations have thereby unfairly diverted trade to said r(•spondent from competitors who do not make use of the same or ~imilar acts and practices and substantial injury has been done by respondent to competition in commerce among and between the vari· ons States of the United States and in the District of Columbia. CONCLUSION The aforementioned acts and practices of the respondent, 'Volf Creek Soap Company, a corporation, are to the prejudice of the public and of respondent's competitors, and constitute unfair meth· ods of competition in commerce within the intent and meaning of Section 5 of an Act of Congress, approved September 26, 1914, en· titled "An Act to create a Federal Trade Commission, to define its po"·ers and duties, and for other purposes." ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Cotn· mission upon the complaint of the Commission, the answer of re· spondent and the agreed stipulation of facts entered into between ·wolf CREEK SOAP CO. 337 327 Order the. respondent he1·ein, Wolf Creek Soap Company, and W. T. Kelley, Cl~1ef Counsel for the Commission, which provides, among other tlungs, that without further evidence or other intervenincr procedure h b ' t e Commission may issue and sen·e upon the respondent herein findings as to the facts and conclusion based thereon and an order disposing of the proceeding, and the Commission having made its fi~dings as to the facts and conclusion that said respondent has VIolated the provisions of an act of Congress, approved September 26, 1914, entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," . It is ordered, That the respondent, Wolf Creek Soap Company, lts officers, representatives, agents, and employees, in connection with the offering for sale, sale, and distribution of soap in commerce among and Lebveen the Yarious States of the United States and in the District of Columbia, do forthwith cease and desist from: , 1. Representing, directly or indirectly, through use of the word 'Doctor" or the abbreviation "Dr.," alone or in conjunction with any other word or words or through the use of any other word or words of similar import, meaning, and effect, or through any other means or device, or in any other manner, that any of its soap products is ~ade pursuant to the formula of, or under the supervision and direction of any doctor· 2. Representing,' directly' or indirectly, through the use of the Word "Med.icated," alone or in conjunction with any other word or ~words, or through the use of any other word or words of similar 1lrlport, me:min1r and effect, or through any other means or device, or in any other ~anner that any of its soaps and soap products have any medicinal and thrmpeutic properties or value unless said prod- Ucts actually contain ingredients of a medicinal and therapeutic nature in such quantity as to give said products a substantial medicinal Und therapeutic value; .. 3. llepresenting, directly or indirectly, through use of .fictltwus or exaggerated price markings and labels, or through any other means or device, or in any manner, that its soaps and soap products have ret~il values or prices in excess of their actual ~eta~] values or prices or ln excess of the prices nt which they are ordmarlly sold or offered for sale at retail.

It is further ordered, That respondent shall,. within 60 da~s .from the date of service upon it of this order, file With the Commission. a report in writincr settincr forth in detail the manner and form m Which it has com~lied wuh the order herein set forth. Syllabus 25F. T. C.